Despite growing ecological and climate awareness, there is currently no common classification system at global or EU level that defines what is an environmentally sustainable economic activity. This lack translates into a huge fragmentation of national practices and market-based initiatives. And it encourages the risk of ‘greenwashing’, i.e. the practice of marketing financial products as ‘green’ or ‘sustainable’, when in fact they do not meet basic environmental requirements.”
To put an end to these problems, the European Union has just approved the first classification system for green investments (taxonomy, in the jargon of the Brussels bubble). The aim of this initiative is also to give clarity to investors and thus encourage the participation of the private sector in the transition to a climate-neutral economy. “It will be a turning point in the fight against climate change,” said the rapporteur of the European Parliament, Sirpa Pietikainen.
The standard defines which activities can be called sustainable and therefore included in a financial product that is advertised as sustainable. A sustainable product will be one that makes a positive contribution to climate protection without harming the environment in other areas (no harm principle). In principle, the classification should apply to all financial products. Emissions that do not use the taxonomy should make this clear in a notice.
The new standard identifies and defines six EU environmental objectives: climate change mitigation; adaptation to climate change; sustainable use and protection of water and marine resources; transition to a circular economy, with waste prevention and recycling; pollution prevention and control; and protection and recovery of biodiversity and ecosystems.
For an economic activity to be considered environmentally sustainable, it must meet the following requirements: contribute substantially to at least one of these six objectives; not to cause significant harm to any of them; be carried out in accordance with minimum social and governance guarantees; and meet specific technical selection criteria.
The only specific sector that in no case could ever be considered a green investment is that of fossil fuels, such as coal or lignite. On the other hand, gas and nuclear energy are not explicitly excluded from the regulation: both may be labelled as transition activities or facilitation of climate objectives. This compromise solution has been satisfactory to both the pro-nuclear Member States, france and the countries of the East; as well as the anti-nuclear ones, such as Germany, Austria and Luxembourg.
However, environmentalists argue that in practice, nuclear power can never be labeled as a green investment. “As the standards of environmental protection are so high (the principle of doing no harm), nuclear will not be able to meet the requirements and will be de facto excluded from sustainable financial products,” says German Green MEP Sven Giegold.
The regulation still needs to be ratified in the coming weeks by the governments of the 28 and the European Parliament, although it is a formality because the two sides closed an agreement in principle on Monday night. The Commission will then be responsible for drawing up the taxonomy before the end of 2021, with the aim of ensuring its full implementation before the end of 2022.
Source: The Spanish